Employment and the collateral channel of monetary policy
Saleem Abubakr Bahaj,
Angus Foulis (),
Gabor Pinter and
Paolo Surico ()
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
This paper uses a detailed firm-level dataset to show that monetary policy propagates via asset prices through corporate debt collateralised on real estate. Our research design exploits the fact that many small and medium sized firms use the homes of the firm’s directors as a key source of collateral, and directors’ homes are typically not in the same region as their firm. This spatial separation of firms and firms’ collateral allows us to separate the propagation of monetary policy via fluctuations in collateral values from that via demand channels. We find that younger and more levered firms who have collateral values that are particularly sensitive to monetary policy show the largest employment response to monetary policy. The collateral channel explains a sizeable share of the aggregate employment response.
JEL-codes: J1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mon
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http://eprints.lse.ac.uk/100934/ Open access version. (application/pdf)
Working Paper: Employment and the collateral channel of monetary policy (2019)
Working Paper: Employment and the Collateral Channel of Monetary Policy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:100934
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